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Renters: You May Qualify for Property Tax Exemptions

By Gary Smith
Renters: You May Qualify for Property Tax Exemptions

A recent ruling in an Illinois Appellate Court could change the standard definition of who qualifies for the homestead tax exemption to include renters under certain circumstances.

When Renters Are Liable for Property Taxes

The Illinois Third District Appellate Court in July ruled that Rock Island County officials were wrong when they denied the request for the homestead tax exemption from a couple who rent a home in Moline.

The homestead tax exemption is available for residential properties “occupied by its owner(s) as the principal residence or that is a leasehold interest on which a single-family residence is situated, which is occupied as a residence by a person who has ownership interest therein, legal or equitable or as a lessee, and on which the person is liable for the payment of property taxes.” The amount varies by county and is based on the current year’s equalized assessed value above the 1977 EAV, up to $6,000 in Rock Island County.

The facts of this case rest on the rental agreement made with the homeowner and the couple, the Shrakes, renting the property. The renters signed a multi-year lease, with the option to purchase the single-family home in Moline. The agreement also outlined that the renters were liable for the real estate taxes, which they paid through an extra charge added to the monthly rent amount. The bank would then pay the county the balance due on the property taxes out of those extra charges.

The Shrakes filed a notarized application with the Rock Island assessment office to receive the general homestead exemption for the 2015 property taxes. The county denied the application because their lease did not require the direct payment to the county collector, which the county argued was required by the homestead exemption statute.

The Appellate Court Ruling

The Appellate Court sided with the Shrakes because, under Section 15-175 of the Property Tax Code, lessees of residential property are entitled to a homeowner’s exemption as long as four conditions are met, the most important being that the lease states the lessee is liable for payment of the property taxes.

Opponents of this decision assert that it will create a situation in which school districts do not have a clear picture of the amount of money coming in from property taxes because every property tax exemption has the larger impact of shifting the tax burden between different property types.